Jefferies has reaffirmed Alibaba as its leading selection among China Internet stocks, emphasizing the company’s operational execution and the pickup in demand for artificial intelligence offerings even as broader macroeconomic conditions remain challenging.
For the June quarter, Jefferies projects Alibaba will report total revenue growth of 9 percent year-over-year, coming in at RMB270 billion - a figure the firm says aligns with consensus estimates. The brokerage expects combined EBITA for the China E-commerce and Alibaba International Digital Commerce Group to be roughly flat compared with the prior year.
Jefferies noted that current market valuations already incorporate the industry’s softening gross merchandise volume (GMV) growth and weaker consumer sentiment, suggesting some of these headwinds are priced in.
Within Alibaba’s operating segments, Jefferies anticipates China E-commerce Group customer management revenue will decline by about 6.5 percent year-over-year, which the firm attributes primarily to prevailing industry GMV trends. In contrast, Alibaba’s Cloud Intelligent Group - identified as the company’s artificial intelligence unit - is forecast to expand revenue by 45 percent year-over-year. That pace would outstrip consensus estimates of 41 percent, supported by strong demand for AI-related products and services, including Model-as-a-Service and other AI revenue streams.
The brokerage signaled a constructive view on Alibaba on the expectation that continued investments in AI and cloud capabilities will produce further benefits during the quarter. Jefferies also characterizes Alibaba’s core e-commerce operations as a robust cash-generating business that stands to gain if consumption in China stages a recovery.
In its base case for the company, Jefferies sees continued market share gains for Alibaba’s Tmall platform along with expanded monetization of the company’s AI offerings as central drivers of the investment thesis.
Sector impacts: The analysis affects the China Internet sector, cloud and AI services, and e-commerce retailing, with implications for revenue mix and monetization strategies across these areas.